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Here’s everything you need to know about MTD for ITSA

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Stuart Miller

Apr 7, 2022

While the government legislation Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) may have faced enough delays to make you wonder if it’s ever going to arrive, the time has come to prepare as it rolls into view in April 2026. 

Sole traders and landlords with an overall income above £50,000 will need to keep digital records from the start date, using compatible software. This will mean managing, tracking and sending quarterly summary updates of business income and expenditure to HMRC, as well as a Final Declaration, via this software. 

While you may not have formally kept records up to this point, perhaps only doing so for the purpose of completing a Self Assessment tax return, accounting software can offer real-time record keeping to ensure this process is as smooth as possible. And rest assured that while MTD for ITSA will require some work to ensure compliance, the benefits could be significant, and can help you better manage your tax going forward. 

All VAT-registered businesses have been required to comply with MTD from April 2022, which means that many qualifying sole traders and landlords will have already taken this step forward. But for those at the beginning of this journey, here are some key things you need to know about MTD for ITSA.

What are the key dates, and how to prepare

Self-employed people and landlords earning above £50,000 annually will need to comply with MTD for ITSA rules from April 2026. Those earning above £30,000 will follow in April 2027. General partnerships and those earning below £30,000 are yet to be mandated and can continue using the old self-assessment system.

While this may feel like a long way away, it’s always worth getting your ducks in a row early. You can do that by signing up voluntarily to get used to MTD rules. You can find out whether you’re eligible for early MTD for ITSA registration here, or speak to your accountant or bookkeeper.

Do all self-employed people have to go digital?

The short answer is yes. Unless you have an exemption, if you meet the criteria then you have to comply with MTD for ITSA.

Meanwhile, those earning below the £30,000 threshold can continue to use the old HMRC system for filing their returns.

Finally, if you own multiple businesses, the income earned from all of them contributes to the £50,000 and £30,000 thresholds respectively.

How do I sign up for MTD for ITSA?

You need to sign up for MTD for ITSA through your cloud-based software, instead of on the HMRC website. This means that you’ll need HMRC-approved software in place ahead of time. 

If you’re unsure how to go ahead, you can ask your software provider or your accountant or bookkeeper how to sign up for MTD for ITSA. As for the details you’ll need, HMRC will request the following information: business name, business start date, email address, national insurance number, accounting period, and accounting type to apply. If you’re looking for more information, HMRC’s guidance on signing up is a handy resource.

What do I need to submit for MTD for ITSA?

From the deadline, you will need to keep digital records of income and expenditure. There are two parts you’ll need to submit for MTD for ITSA:

  1. Quarterly updates, including a summary of business income and expenditure.
  2. Final declaration. You’ll need to share details of all other taxable income by 31 January each year, including investments and savings interest.

While it may feel like you have plenty of time to prepare for MTD for ITSA, it’s absolutely worth signing up early if you can, or talk to your accountant about how you can get prepared. By taking the time to get used to the digital tools, the transition will be all the smoother. 

If you need any more information around MTD for ITSA, head to our handy hub or our MTD for ITSA page to find out more.

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